Friday’s debate could focus on financial security

Friday

Sep 26, 2008 at 2:00 AM

The financial crisis could broaden the focus of Friday’s presidential debate—if it goes forward—beyond foreign policy to issues of U.S. financial security. Both campaigns are readying for possible questions about the country’s debt, the role of sovereign-wealth funds and trade policy.

Nick Timiraos

The financial crisis could broaden the focus of Friday’s presidential debate—if it goes forward—beyond foreign policy to issues of U.S. financial security. Both campaigns are readying for possible questions about the country’s debt, the role of sovereign-wealth funds and trade policy.

The proposed foreign-policy focus of the debate, to be held in Oxford, Miss., appears to give an advantage to Republican nominee John McCain, who has long touted his commander-in-chief credentials, even as it offers an opportunity for Democratic rival Barack Obama to assert his qualifications. Both candidates made the Iraq war a central issue during the presidential primaries earlier this year.

With Washington and much of the rest of America fixated on the country’s financial problems, the two campaigns have in recent weeks focused almost exclusively on the economy. For many voters, the economy has emerged as a top issue.

Some people have already called for economic-crisis-related questions to be included in the debate. “They should be able to talk about this some of the debate, because it is a security issue,” former President Bill Clinton said in an ABC News interview Thursday.

Much of the debate is likely to involve substantial discussions on well-worn foreign-policy issues, including how the U.S. could exit from Iraq, stabilize Afghanistan, achieve Middle East peace and confront a resurgent Russia. But questions of national security as they relate to the economy could present a wild card, giving the candidates a chance to address issues that have received less attention, including the growing role of sovereign-wealth funds and overseas ownership of U.S. assets.

The campaigns have agreed to three debates, though Sen. McCain on Wednesday proposed postponing the first one until there’s an agreement in Washington over a financial bailout plan. The second debate is set to be conducted town-hall-style, with the candidates taking questions from audience members; the third will focus on domestic and economic policy.

For Friday’s debate, moderator Jim Lehrer of the Public Broadcasting Service will decide which questions to ask.

The sharpest differences in the economic views of the candidates could be over trade. In the hard-fought Democratic primaries, Sen. Obama campaigned on a promise to renegotiate the North American Free Trade Agreement to include stronger labor and environmental safeguards. In ads and on the stump, he has hammered away at Sen. McCain for supporting trade deals and tax breaks, which Sen. Obama says have exported jobs from the U.S.

Sen. McCain, a committed free trader, regularly extols the political dividends of opening new markets to U.S. goods. He has criticized Sen. Obama’s position on Nafta as one of “betrayal” that could upset foreign capitals. “You know what that message sends? That no agreement is sacred if someone declares that, as president of the United States, they would unilaterally renegotiate it,” he said this summer.

Sen. McCain supports free-trade pacts that the Bush administration has negotiated with Colombia and South Korea, while Sen. Obama opposes them.

The presidential candidates also differ on economic policy towards China, with Sen. Obama calling for more-aggressive action to address what he says is China’s manipulation of its currency. He has pledged to back legislation that would define currency manipulation as an illegal subsidy, and would allow the U.S. to impose duties on more Chinese goods.

Sen. McCain has accused his opponent of “preying on the fears stoked by Asia’s dynamism,” though the Arizona senator has called for China to meet its obligations to international trade agreements.

Both candidates have warned against the dangers of running big deficits while borrowing foreign money. In a Houston speech on energy in June, Sen. McCain warned that “borrowing Saudi money for Saudi oil” would lead to “dependency and debt.”

“Over time, in interest payments, we lose trillions of dollars that could have been better invested in American enterprises,” he said. “And we lose value in the dollar itself.”

On the stump, Sen. Obama has faulted the Bush administration for allegedly weakening the country’s long-term economic standing by driving up the national debt, in part, with the costs of the Iraq war. “We took out a credit card from the bank of China and the bank of Saudi in the name of our kids,” he said in May. “You’re going to be paying them interest for generations to come—that makes us weaker.”

More recently, the Illinois senator has stepped up warnings that a ballooning national debt or a weak economy will erode U.S. sovereignty. “When the smoke clears on Wall Street, what you’re going to find is that some U.S. companies that we always thought were standard bearers for what the United States was are going to suddenly be owned by a bunch of sovereign-wealth funds,” he said at a New Mexico fund-raiser last week.

Sovereign-wealth funds are pools of government money often financed by a trade surplus and set aside for investment. Such funds, including those of China and some Middle Eastern countries, are expected to grow rapidly in coming years. Some Western policy makers worry that the funds’ lack of transparency and their control by mostly nondemocratic governments could lead foreign countries to accumulate strategic assets in the West.

In February, Sen. Obama expressed concern over sovereign-wealth funds’ political motivations. Sen. McCain hasn’t been as vocal about the risks of sovereign-wealth funds, but Kevin Hassett, a top McCain economic adviser, has called for Congress to bar the funds from exercising the voting rights of shares they purchase.

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